The Pros and Cons of Buying in Up and Coming Neighbourhoods

December 27, 2017Scott McGillivray

Real estate investors are always looking for the next up and coming neighbourhood. Why? Because if you can buy while it’s still cheap, the value of your house will eventually soar and you’ll make a great profit. The only problem with this theory is that no one has a crystal ball, and there are no guarantees that the neighbourhood will experience the kind of growth you’re expecting. If you’re thinking of buying in an up and coming neighbourhood make sure you weigh the risks versus the possible rewards. Consider the pros and cons before you take the plunge.Scott McGillivray is a real estate expert and host of HGTV Canada’s Income Property and Moving the McGillivrays.

Real Estate

The Pros and Cons of Buying in Up and Coming Neighbourhoods

December 27, 2017 Scott McGillivray

Real estate investors are always looking for the next up and coming neighbourhood. Why? Because if you can buy while it’s still cheap, the value of your house will eventually soar and you’ll make a great profit. The only problem with this theory is that no one has a crystal ball, and there are no guarantees that the neighbourhood will experience the kind of growth you’re expecting. If you’re thinking of buying in an up and coming neighbourhood make sure you weigh the risks versus the possible rewards. Consider the pros and cons before you take the plunge.Scott McGillivray is a real estate expert and host of HGTV Canada’s Income Property and Moving the McGillivrays.

Pro: Low Prices

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Pro: Low Prices

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The prices in up and coming neighbourhoods tend to be lower than those in established areas. You can likely get a house that meets your needs for less than a similar house in a more popular area.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Low Prices

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The prices in up and coming neighbourhoods tend to be lower than those in established areas. You can likely get a house that meets your needs for less than a similar house in a more popular area.

Photo Credit: Getty Images

Con: You May Have Already Missed the Deal

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Con: You May Have Already Missed the Deal

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You may think you’re ahead of the game, but if you’re one of many people who have recently discovered the area, you might be paying a higher price than you should.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: You May Have Already Missed the Deal

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You may think you’re ahead of the game, but if you’re one of many people who have recently discovered the area, you might be paying a higher price than you should.

Photo Credit: Getty Images

Pro: Your Property Value Will (Hopefully) Increase

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Pro: Your Property Value Will (Hopefully) Increase

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As the neighbourhood becomes more desirable and popular over time, your home’s property value should also increase. Ideally it will increase in value at a faster rate than houses in already established neighbourhoods.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Your Property Value Will (Hopefully) Increase

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As the neighbourhood becomes more desirable and popular over time, your home’s property value should also increase. Ideally it will increase in value at a faster rate than houses in already established neighbourhoods.

Photo Credit: Getty Images

Con: It's a Real Estate Risk

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Con: It's a Real Estate Risk

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Houses in less than stellar areas come with a certain amount of risk. If the neighbourhood doesn’t deliver on its promise, the value of your home won’t go up and you’ll be stuck in a crummy area.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: It's a Real Estate Risk

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Houses in less than stellar areas come with a certain amount of risk. If the neighbourhood doesn’t deliver on its promise, the value of your home won’t go up and you’ll be stuck in a crummy area.

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Pro: Value Add Renovations

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Pro: Value Add Renovations

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Because houses in run down areas often need renovations, it opens you up for making value added renovations that can significantly increase the value of your home. Value added renovations on top of the equity you’ll build over time can mean big bucks when it comes time to sell.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Value Add Renovations

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Because houses in run down areas often need renovations, it opens you up for making value added renovations that can significantly increase the value of your home. Value added renovations on top of the equity you’ll build over time can mean big bucks when it comes time to sell.

Photo Credit: Skit Inc.

Con: Over Investing in Renovations

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Con: Over Investing in Renovations

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It’s difficult to know how much to spend on renovations. In most cases you want them to be in keeping with comparable homes in the area, but in an up and coming neighbourhood you may have nothing to compare to. If you overinvest you may never see the return on your investment.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: Over Investing in Renovations

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It’s difficult to know how much to spend on renovations. In most cases you want them to be in keeping with comparable homes in the area, but in an up and coming neighbourhood you may have nothing to compare to. If you overinvest you may never see the return on your investment.

Photo Credit: Getty Images

Pro: Strong Communities

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Pro: Strong Communities

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Up and coming neighbourhoods tend to have a strong sense of community. Those who move and start to establish roots in these areas believe in them, and work hard to make them better.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Strong Communities

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Up and coming neighbourhoods tend to have a strong sense of community. Those who move and start to establish roots in these areas believe in them, and work hard to make them better.

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Con: Higher Crime Rates

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Con: Higher Crime Rates

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Communities that haven’t yet reached their potential may experience higher crime rates. Gentrification may reduce this over time, but it’s something you have to be prepared to deal with for the time being.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: Higher Crime Rates

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Communities that haven’t yet reached their potential may experience higher crime rates. Gentrification may reduce this over time, but it’s something you have to be prepared to deal with for the time being.

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Pro: Local Businesses

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Pro: Local Businesses

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Up and coming neighbourhoods are often filled with small, independent businesses. As a result you get to help grow the community and support local business owners.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Local Businesses

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Up and coming neighbourhoods are often filled with small, independent businesses. As a result you get to help grow the community and support local business owners.

Photo Credit: Getty Images

Con: Lack of Convenience

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Con: Lack of Convenience

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These types of neighbourhoods tend to lack some of the conveniences of more established areas. You might not be able to get all the products and amenities you’re used to, and transportation may be an issue.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: Lack of Convenience

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These types of neighbourhoods tend to lack some of the conveniences of more established areas. You might not be able to get all the products and amenities you’re used to, and transportation may be an issue.

Photo Credit: Getty Images

Pro: Neighbourhoods with Vibrant Personalities

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Pro: Neighbourhoods with Vibrant Personalities

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Up and coming neighbourhoods have a lot of character and vibrant atmospheres. Artists, musicians and craftspeople tend to flock to these areas.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Neighbourhoods with Vibrant Personalities

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Up and coming neighbourhoods have a lot of character and vibrant atmospheres. Artists, musicians and craftspeople tend to flock to these areas.

Photo Credit: Getty Images

Con: Iffy School District

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Con: Iffy School District

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The school district might not be as good as you’d like. This may improve over time but it’s certainly worth considering if you have children or are planning to have children in the near future.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: Iffy School District

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The school district might not be as good as you’d like. This may improve over time but it’s certainly worth considering if you have children or are planning to have children in the near future.

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Pro: Design Freedom

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Pro: Design Freedom

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When it comes to the exterior of your home you will likely have a lot of freedom. In some neighbourhoods there are governing bodies that have a say in what you can and can’t do in terms of paint colours and renovation styles, but in up and coming neighbourhoods it’s not usually an issue.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Pro: Design Freedom

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When it comes to the exterior of your home you will likely have a lot of freedom. In some neighbourhoods there are governing bodies that have a say in what you can and can’t do in terms of paint colours and renovation styles, but in up and coming neighbourhoods it’s not usually an issue.

Photo Credit: Getty Images

Con: Surrounding Houses

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Con: Surrounding Houses

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The surrounding buildings may not be kept up very well. As people start to fix up their homes this will change, but there’s no telling how long you might be stuck with unkempt neighbouring properties. This can ultimately affect your resale value.

Real EstateThe Pros and Cons of Buying in Up and Coming Neighbourhoods

Con: Surrounding Houses

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The surrounding buildings may not be kept up very well. As people start to fix up their homes this will change, but there’s no telling how long you might be stuck with unkempt neighbouring properties. This can ultimately affect your resale value.